Mayor argues to hold course on pension plan

OUTLINING THE CITY’S POSITION: Joseph Newton of Gabriel Roeder Smith and Company of Irving, Texas and the city’s actuary appeared before the State Pension Review Commission yesterday with Mayor Scott Avedisian, his chief of staff Mark Carruolo and city finance director Ernest Zmyslinski.

“Very comprehensive presentation,” were the words Rosemary Booth Gallogly, director of revenue for the state administration, used to describe the city’s appearance yesterday before the State Pension Review Commission.

But while the state may have an understanding of the city’s Police/Fire I pension plan that is classified as “critical,” Mayor Scott Avedisian remains focused on how that situation could be distorted by a group of “crazies” who have lumped the city’s funded pension liabilities with its long-term debt and after employment benefits to cast a picture of a municipality doomed to financial ruin.

The issue was expected to come up last night before the City Council, as the city’s actuary, Joseph P. Newton, answered questions about the city’s pension plans. Newton, a senior consultant at Gabriel Roeder Smith and Company of Irving, Texas, was in Rhode Island to assist with the city presentation to the state. As the council has requested to question the city’s actuary, Avedisian asked Newton to stay and address the council.

Roger Durand, who regularly attends council meetings and has questioned the administration on its debt, asked of the commission whether it would consider issuing a “taxpayer impact statement.” He also questioned projected rate of investment returns, pointing out that the bond rating agency Moody’s is considering a 5.5 percent rate of return on California bonds.

Durand also argues that pension payments are on a path of becoming a greater and greater percentage of the city’s operating budget and that other post employment benefits are being ignored.

From Newton’s perspective, three of the city’s pension plans are in good shape and the city has a plan in place to cope with its one problem plan – Police/Fire I – that is now closed and has about 400 retirees and 53 active members. As of 2011, the plan has an unfunded liability of $242 million.

“The funded ratios,” Newton said of the municipal plan and police and fire II plans in an interview following the commission presentation, “and they have the self-correcting mechanisms in them.”

Those three plans take into account market returns and adjust both any increases paid retirees and city and employee contributions accordingly.

No such mechanisms were put in place with Police/Fire I, although unlike many other municipal plans listed at “critical,” the plan does not have an automatic cost of living adjustment [COLA]. Instead, pension increases are linked to current pay increases of both the police and fire departments.

Further, 18 years ago the city implemented a 40-year plan, which it has adhered to, to meet the projected payments of the plan.

“I think they have been very proactive,” Newton said of the city. “They are way ahead of the time.”

“The 40-year plan has worked well so far. That won’t be the case if we change it,” Avedisian said following the committee meeting.

The state is looking for municipalities to adopt 30-year funding plans to meet standards, but the mayor says it would be “silly” for Warwick to take such an approach now since it would only add on eight years and millions in cost to the taxpayers.

In his formal remarks, Avedisian outlined how former Mayor Lincoln Chafee introduced an ordinance calling on the city to implement the plan in 1996.

The mayor told the committee that Newton has determined “that the most prudent course of action is to continue to comply with the city’s current Police/Fire I plan.”

Taking that course, the city will pay $14.8 million into the plan this year. That payment is based on assumptions that investment returns will yield 7.5 percent; that retiree benefits will increase annually by 3.75 percent based on raises given current police and fire and on a mortality rate based on white-collar college-educated retirees who live longer than blue-collar employees.

As the administration has negotiated no-wage increase 3-year contracts with police and fire, the unfunded liability of Police/Fire I will decrease.

However, while this bodes well for the city, the numbers have not been adjusted to reflect the change. That’s part of the strategy, as actuaries would not alter projections from month-to-month based on market performance.

According to the 40-year plan, the city’s contribution will continue to grow annually by about 5 percent to a point where it will annually be paying about $30 million. As the growth in payments is expected to be in line with the growth in the budget, they will not become a greater and greater percentage of the budget as some fear, Newton said.

Because it is a closed plan, however, it will reach a point where it is fully funded and payment will drop off dramatically in the closing years of the plan.

That process promises to be speeded up with Avedisian’s promise yesterday that should the legislature approve Governor Chafee’s proposed budget and the $800,000 Warwick would get in pension assistance, the funds would augment, not substitute, city payment plans. This would reduce the unfunded liability of the plan.

“If we get extra money in, it should all go into the pension,” Avedisian said as he joined with reporters outside the commission hearing.

Responding to critics that the actuary is there to make the city administration look good, Mark Carruolo, the mayor’s chief of staff said, “We don’t tell Joe [Newton] what to do. Joe tells us what to do.”

Comments

First off, let's get the record straight. According to Mr. Newton's comments at last nights' council meeting, he does NOT tell anyone what to do. His job, as he stated a number of times, is to crunch the numbers. Fund, not to fund, amortize 30, amortize 40 years? That is up to the city to decide.

And regarding the Mayor, "crazies"? It is getting to the point, if we are not already there, that Mr. Howell is devoid of questioning this Mayor in any intellectual way regarding the financial viability of this city. These so-called "crazies", DO HAVE considerable more financial experience then Avedisian and have in fact worked in the REAL WORLD vs. his entire career in Govt.. The way the "police & Fire 1" pension sets up, or should I say we, the taxpayer is being SET UP, Avedisian will be long gone from Warwick's Govt. when the S....T hits the fan, so to speak. In fact, the actuarial report shows only a slight increase in taxpayer contributions through Cy2017. But, what happens then, from a taxpayer contribution of $14.3 million in 2013, we go to $18.9 Million in 2019, to $25.1 Million in in 2022, topping off at $31.1 Million in 2026. So, you can see, there is some time to plan for this. But remember, there is also that HUGE unfunded health care liability that has to be paid as well. So what is the plan?? Calling people that question, "crazies"?

Someone might ask how this administration is PLANNING for the city to pay this huge outlays. They also might ask, who the "crazy" one is that runs a city and has no plans regarding how to pay for almost a Billion Dollars in liabilities.

Tuesday, March 12, 2013

Reality

The people who question the fiscal viability of the city are now called "crazies" This is quite amazing statement considering the Mayor lives in such a big GLASS HOUSE.

Mayor you either retract that "crazy" characterization immediately or your activities on or off work are now fair game.

Tuesday, March 12, 2013

fenceman

Here are some facts from last nights circus side show.

1. When Mr. Newton was questioned on whether or not his firm considers the city's budget, expenses, revenues, tax increas laws, and ability to pay, his answer was "No, it is not our job to consider a communities ability to pay". Thats comforting.

2. When asked if he thought that the 7.5% rate of return was realistic and acheivable, his answer was, "its a coin toss".

3. When asked about his letter that assumes no more pay raises for existing employees, and no new hires, he states "that the presumption is a 1 to 1 ratio of hiree to retiree.

4. He states that the city budget must grow by increasing taxes. He was asked if he knew what the state law was pertaining to the maximum tax increase allowable and he said "he was not aware".

5. He was asked if an impact study was performed on how these increased contributions would effect all other aspects of the citys budgets and operational costs and his answer was "no".

Feeling comfortable yet? A thank you goes out to Mr. Merolla, Solomon, and Ladiceaur for asking realistic questions.

Now lets get down to the 6 other complete morons that the ostriches in this community have elected.

Wilkinson Ward 3: WAH WAH WAH, you used the term "white collar workers". They are not white collar workers, why did you do that. She isnt smart enough to realize that the term only was used to reflect mortality rates. DOPE #1

Chadronet Ward 2: Still dosent realize where he is, what day it is, what continent he is on, or when its time to pee. Dope # 2

Colontuono Ward 1: No imput of any substance whatsoever. Sat with a dumbfounded look (much like Travisty) all night. Dope # 3

Travis Ward 6: No questions, no imput, her only role was to vote against suspending the rules for public imput, as she is so dumb that it is clear she would have no idea on how to institute Roberts Rules of Order to conduct a hearing. Furthermore, she was ordered my her King Mayor not to allow public comment. She is still wondering what the big hand on the clock does. Dope # 4

Galuucci Ward 8: The twin to his usless spineless brother, he offers no fiscal question, but in another slimmy attempt to win union popularity makes that statement that we need to give the police and fire as much as we possibly can for their heroic work. Only applause all night from the hero's ( who still dont understand simple math). Dope # 5

Donovan Ward 7: Sat silent, starring at the ceiling, offered no imput as he doesnt comprehend the pension basics, and then in an act of betrayal to his former allies on the council and constituents, he votes with Donna Travis and the other 4 dopes, not to allow the residents and opportunity to speak. That move is gonna come back and bite him in the butt in 2014. Dope # 6

And now, what you have all been waiting for, the BIGGEST DOPE OF THE NIGHT!!! None other than Mayor Scott usless Avedisian who said not one word. What a leader !! He was propably counciled by his brother, the captain of the Italian crusie ship that ran aground last year, on how to act as the person in charge. Mouth shut, nod the head a few times, try to keep the face from getting too red from the lies, and paddle away from the sinking ship Warwick.

Another pittifull display of cowards.

Tuesday, March 12, 2013

Bob_Cushman

Thank you Mr. Durand for presenting some fiscal sound questions, At least you had an opportunity to be heard last night.

The most telling comment as the previous posted has referenced was the fact that on several occasions while Mr. Newton was answering questions posed by Councilman Merolla, he stated that it was not his job to determine if the city could in fact make the scheduled payments he has proposed into the Police/Fire I pension plan or all the other plans for that matter.

Can we guess whose job that falls on? MAYOR AVEDISIAN and the CITY COUNCIL!

Newton didn't know what effect staying with this plan would have on future budgetary expenses including giving raises to current employees or paying for the salary and benefits of the new employees that soon will be hired in the city with federal funds for three years. What happens when those funds run out where are those dollars going to come from?

Newton also made the statement that current employees can expect to see small or practically no increases in salary as they have experienced in the past because the city needs to stay with this plan and giving raises will increase the liability in Police/Fire I.

Here is a novel idea - maybe its time to open up negotiation with Warwick retirees like every other city is doing and ask them to suspend the COLA payments until the fund is above critical ststus. Maybe then employee can get a raise equal just to stay even with inflated gas, food, utility costs

So in effect the MAYOR’s policy is to screw current employees to make up enough funds to stay with this plan. And on top of that Mr. Newton would not give any guarantee this plan would work. How do you like those 50/50 odds he sighted, while you current economic outlook falls further and further behind for you and your family? Sounds like we are playing a game of Russian Roulette.

Newton also didn't know the general laws of RI which place caps on the amount (thank god) of increases in property taxes can be applied from year to year.

Grest idea - lets keep raising the property taxes in Warwick. Mayor Avedisian you still don't understand why METLIFE is leaving thie city and this state? Who is the dope?

So here is my challenge to the MAYOR and the CITY COUNICL - spend the money to build a model to forecast expenses related to pension and retiree healthcare expenses and all other expenses in the city and schools over the next 5, 10 and 15 years. Then build a revenue model over the same period of time.

Subtract the expenses from the revenue and see if it balances.

I MAY BE CRAZY - but I will bet the math doesn’t add up.

Will the mayor and the council do this, of course not? They really don’t want to know the answer.

My advice to the employees in the city of Warwick and taxpayer- demand this analysis.

And if Mayor Avedisian and the city council are so convinced this plan will work have them sign an statement making them liability personally if in fact it fails.

I guess I am a crazy!!!

Tuesday, March 12, 2013

fenceman

WHERE IS STEVIE D????????????????

Tuesday, March 12, 2013

WwkVoter

Ok the mayor should not be calling fiscal critics "crazies". It makes him look poorly. And Mr. Howell should be asking more questions about these numbers because right now he hardly looks "woodward-ish". As to the "dopes" on the council, lets remember they were duly elected by voters, at the very least.

But from what I can see from RoyDempsey's post, the Police/Fire1 plan's contribution will climb from approx 15million now to around 30million in 17 years. Considering the budget will grow due to the usual factors such as inflation by about 3% per year anyway, that 15million becomes 25million in 17 years ANYWAY. These are round numbers and there are all kinds of factors which can change, but it looks to me like the pension/fire1 burden is growing just a little faster than the budget as a whole. (and a few years after that, it goes away and the city has 30million less expenses). I'm not seeing a crisis here.

Now, as to OPEB, can any of you point to the expected increases over the same timeframe?

Wednesday, March 13, 2013

RoyDempsey

@TaxPayer. Your point is well taken; however, with little to NO growth in Rhode Island's economy, in fact, if you are one of the unemployed 60,000, you may consider Rhode Island's economy to be contracting and not growing, your assumed growth in Warwick's budget will be borne by additional taxes on existing businesses and property owners. No current growth, property taxes currently amongst the highest in the county, how is it possible to tax our way out of this? You know the city budgets are tight right now - 3 year contracts with no pay increases plus higher contributions to health coverage. We know our taxes have been increased every year, significantly two years ago with the increase in the car tax to the point where we are paying a tax on an overvalued vehicle.

So, the point is, where is the money coming from? We need a plan. Something basic that shows expected revenues and expenditures for the short and long term. Nothing to hide, right???? Why hasn't this been done?

Wednesday, March 13, 2013

GordianKnot

I decided to attend thecouncil meeting on Monday to see for myself what transpired rather than relying upon the views of others.

Here are my thoughts/observations:

The critical plan is closed meaning no knew employees coming in so the city is paying most of the bill and will be paying all the bill shortly.

The yearly contribution is pretty accurate and the longer term projections are less accurate as they can be influenced by rate of trurn, the effect of three zero pay increases, the additional $800,000 from the state and other things. That's why they are updated regularly.

There is a funding plan began many years ago that has been followed and the plan id to follow it.

Those what I believe are facts. These are my observations.

Councilman Merolla doesn't seem to know what he's talking about. Most of what he says either doesn't belong in the conversation or doesn't ad tho the conversation.I would have expected more from someone who's been on the council for 10 years. He's very scarcastic arrogant.

Councilman Slomon made a great summary but his points were backward. Being conservative on pnesion assumptions is a good thing, not a bad thing. Is he running for MAyor? Seemed to be pandering to firemen in attendance.

I don't have the answers but wacting the meeting I'm not confident anyone does but at least there is a plan. I think councilman gallucci summed it up best by saying these bills are not do and payable now and there has been thought given to the problem.

Wednesday, March 13, 2013

RoyDempsey

@GordianKnot. I am not sure what you mean by at least there "is a plan"? Do you mean a plan regarding this pension plan, or a plan regarding future expenditures and revenues for the city as a whole. For sure, Rhode Island did not plan itself to be at the bottom of the rankings for a host of business and tax issues. The issue is how does this plan put forward for the police and fire 1 fit into the overall finances of this city. That has not been done. Like I stated - we currently are a high tax state and city. Our economy is stable if not contracting. There has been limited to no growth in Warwick's tax base and in fact we have just seen a major employer in this city, MetLife, start moving jobs out of state. Watch out, because MetLife completely CLOSED its New Jersey operations. Personally, as a property owner, I want to know how we, as a city, are going to confront these issues. Train station is no where? Where is the economic growth?

Wednesday, March 13, 2013

patientman

So the city is losing revenue from Metlife. And we are going to increase our payments to Police/Fire 1 by 5% every year. Our taxes are up by over 50% since 2007 (I believe that is correct) .

That 5% increase will eat up all the additional tax increases and leave nothing for the current employees. The taxpayers and the current employees are going to be more comfortable if they bend over.

Its time for the mayor to organize the retirees and co-opt them in saving this city.

Right now Avedisians plan is to hold the city together until he can to get to Smith hill

Wednesday, March 13, 2013

Unionthug

I'm here fenceman. Not saying much because meeting went as I had assumed it would. As all

Of you are very pessimistic, I am optimistic, we just went through terrible times, things are on the up (my opinion Roy). Are we free and clear of problems no. Do I think things will be better yes..

Wednesday, March 13, 2013

Unionthug

BTW, I'm not an avadesian supporter, my question to you where on smith hill is he going to go? Governor, nope doesn't have the horsepower. Lt governor, nope not a real position. Washington? Nope can't beat the deadbeats that are already there. Where is he gonna go?

Wednesday, March 13, 2013

fenceman

Steve, the meeting went as you assumed? You werent there, no public questions were allowed, and the only applause came from your brothers in response to the most idiotic statement of the night by moron Gallucci. Is that open transparent government?. Why werent your brothers screaming when they shot down questions from the public?. I guess you guys believe everything they are told to believe and cant compose a logical question on their own. What a shame.

Wednesday, March 13, 2013

Unionthug

Yes yes yes, what a smart man you are fenceman... We are all robots just nodding our heads yes. What did you want the guys to start torching the place because they said no public comments? The city coucil said no comments and you move on. They are up there and you are in you seat. There is a reason for that!!!

Wednesday, March 13, 2013

bendover

"What we have here is failure to communicate..." Let's look at the cast from the circus...Rosemary Booth Gallogly, from House fiscal advisor to...STATE DIRECTOR OF REVENUE??? Obviously assumed the position of see no, speak no, hear no evil at any hearings before the House Finance Committee for about, 10 years, when Auditor General Almonte warned about the coming storm called UNFUNDED PENSION LIABILITIES.

The best questions of the night were from the audience and Merolla, Solomon, and Laducier.

In summarizing Mr. Newton's "observations based on assumptions"...We have a figure that will continue to climb over the next twenty years to fill the hole in Pension I as part of city's contribution...We have an insanely optimistic anticipated rate of return of 7.5%...We are losing population, losing taxable property around the airport, Met Life leaving is the tip of the iceberg, but folks are called CRAZY for questioning authority, in this case elected officials, is that about it? REALLY? So, who exactly is crazy expecting the thinking public who understand numbers to buy this hogwash? Detroit, Stockton, CA guess what...they were too big to fail...

Wednesday, March 13, 2013

patientman

Compare what has happened in East Greenwhich over the past 7 years with their tax rates. There have been increases, but nothing like here.

4% tax rate increases every year should not be the norm.

Wednesday, March 13, 2013

Unionthug

East Greenwich is totally different. They have a separate Fire Tax. Add that into the equation.

Wednesday, March 13, 2013

patientman

SteveD, Yes there is a fire tax. But the car tax rate in EG is $22.88 vs. Warwicks $34.60. My point is EG is a well run town that isn't burdened by excessive debt. The home values went up 10% last year and their schools are the finest in the state. Overall they pay a higher tax rate, but get FAR more for their money. In Warwick we have falling home prices, and schools that certainly don't attract young families.

Wednesday, March 13, 2013

GordianKnot

There's never been a 4% tax increase in warwick. What was it last year, 2%. I'd rather have a 2% tax increase than zero's and end up like providence.

Wednesday, March 13, 2013

Unionthug

If the "crazies" got the numbers they wanted they would have complained about the city and its workers. If the "crazies" got the numbers they didn't like they would have complained about the city and its workers. Moral of the story, the "crazies" were always gonna complain. They wouldn't be happy unless they are tax free and wiping they rear ends with $100 bills.

Wednesday, March 13, 2013

RoyDempsey

Have you been drinking SteveD?

Wednesday, March 13, 2013

Unionthug

Nope

Wednesday, March 13, 2013

Reality

Steve D....again resorting to aspersions.....just like Avedisian....when you can't answer the questions attack the messengers....this is pathetic....apologize Stevie.

Wednesday, March 13, 2013

Unionthug

What question didn't I answer?

Wednesday, March 13, 2013

fenceman

Stevie D,

Talking to you is like talking to a pork chop. You just dont get and you never will. So keep an eye on the "crazies", as they will be breaking some fun news soon.

Wednesday, March 13, 2013

Unionthug

Can't wait!!! What's it in regards to?

Wednesday, March 13, 2013

Unionthug

Or I bet it's top secret? News that's really gonna matter. The 3 of you really have the pulse of the 90000 residents. God speed!!!

Wednesday, March 13, 2013

patientman

Knot,

The tax increase two years ago was 4% and the city council boasted that they were proud they didn't increase it to the max. Thanks for saving us that 0.25%. Well run cities (and states) don't need to consistantly raise the tax rates. Growth increases tax revenues instead. Less people live in Warwick now than there were in 1970. Does that sound like a well run city to you.

Thursday, March 14, 2013

Bob_Cushman

Consider this logic from the actuarial expert: To reduce the amount of money that is required to fund PolicI/FireI pension plan the recommendation to Mayor Avedisian was to negotiate contracts with current police/fire employees for no raises for the next three years. This will result in no COLA payment to the retired employees.

Now that COLA would typically be about 3.5% based on past raises to current employees.

So we are told we cannot afford to give 3.5% COLA payments to retirees in one breath, and in the other breath told that if the city can increase its contributions to the Police and Fire I pension plan by an average of 3.75% each year for the next twenty years - the fund will be funded above 60%.

Does anyone realize the utter contridiction in that logic?

Let me explain - ever without COLA payments, the taxpayers will still be required to pay an additional 3.75% compounded rate each year for the next twenty years. Does that equate to like payinga COLA anyways?

Thursday, March 14, 2013

Unionthug

Bob,

Whose getting 3.5 percent raises? Based on past raises? When was the last time there was a 3.5% COLA paid out?

Thursday, March 14, 2013

Bob_Cushman

Steve from 2003 through 2009 police and fire received a 21.25% raise over those 6 years for an average over 3.5%. Don't get all tied up in the numbers.

The point I am trying to make is that the actuarial expert testified that in order to cut future liabilities employees, and thus retired Police/Fire I member will not receive a COLA.

If we can't afford to give a COLA whether it be 3.5, 3 or 2.5 percent, how is the city going to afford paying an annual 3.75% increase in tax dollars to the fund?